Photographer: Johannes Eisele/AFP via Getty Images

China Fines Repeat Offender $170 Million for Stock Manipulation

Updated on
  • $36 million penalty over mainland-Hong Kong manipulation
  • Tang also ordered to pay $134 million in China trading case

Chinese regulators seem to have run out of patience with Tang Hanbo.

The China Securities Regulatory Commission on Friday ordered Tang to pay a total of 1.17 billion yuan ($170 million) in two cases of stock market manipulation, one of which was the first to involve trading through the stock connect between the mainland and Hong Kong. Tang, 43, has been punished for illegal trading at least twice before. But it appears his previous penalties from the CSRC, which include 39 million yuan in 2014 and 15 million yuan in 2015, weren’t enough to deter his bad behavior.

On Friday, Tang, a Chinese national based in the city of Shenzhen, was ordered to pay 251 million yuan for allegedly using the link between the Shanghai and Hong Kong exchanges to manipulate a Shanghai-listed stock, Zhejiang China Commodities City Group Co. He was also hit with 925 million yuan in fines and disgorgement over domestic trades carried out from December 2014 to April 2015.

“It seems to be the record fine imposed by CSRC on individuals by amount so far,” said Eric Liu, a partner at Zhao Sheng Law Firm in Shanghai. “This is not the first time Mr. Tang was sanctioned by CSRC for manipulating stock prices and that is one of reasons why the fine amount is that high.”

C.L. Chow & Macksion Chan, a law firm representing Tang in an earlier judicial review, declined to comment.

Larger Penalty

The penalties imposed on Tang are smaller than the 3.47 billion yuan the CSRC plans to impose on Xian Yan, a former controller at Guangxi Future Technology Co. The regulator will penalize Xian for suspected violations on information disclosure and stock manipulation, spokesman Zhang Xiaojun said at a briefing on Feb. 24. The penalties haven’t been officially announced by the CSRC.

Trading Chinese stocks using connect-enabled accounts in Hong Kong has less regulatory oversight because mainland regulators and exchanges have real-time identification of every investor. Authorities in the former British colony can only get such data by requesting it from brokers. The CSRC’s fine against Tang in the connect case is the highest possible, said Natasha Xie, a Shanghai-based partner with JunHe LLP, and shows the regulator is serious about enforcing cross-border cases.

December’s start of a second trading link with a mainland city, between Hong Kong and Shenzhen, was accompanied by an agreement to strengthen regulatory and enforcement cooperation between China and Hong Kong, including cross-border investigations into market misconduct.

Spoofing Activity

In the Hong Kong-related penalties, Tang was fined 209 million yuan over trading in Zhejiang China and told to give up illicit gains of 42 million yuan. Fellow trader Wang Tao, who couldn’t be reached for comment, was given a 600,000 yuan fine over the transactions.

Both traders have the right to appeal.

In the other case against Tang, the CSRC claimed that he and four of his relatives manipulated mainland stocks using seven domestic accounts. The regulator issued a penalty against the five accused individuals totaling 990 million yuan. The SFC also helped collect evidence for the CSRC in the case.

In December, Tang filed a judicial review in the Hong Kong High Court to rule that the SFC’s seizure of trading data from his home was unlawful. The SFC had share the information seized with mainland officials.

The CSRC said that in the stock connect case Tang and Wang allegedly engaged in practices that included spoofing, manipulating opening and closing prices, and self-trading. From Feb. 4 to April 26, 2016, their trading accounted for more than 10 percent of the stock’s daily volume. In 10 days during that period, their activity was more than 20 percent of the market in the shares.